More on Logistics vs Supply Chain
TOWARDS the end of my talk on Logistics 101 at the MARINA
sponsored seminar last May, I devoted a few slides to Supply
Chain Management. I ended by saying that there is no consensus
on the definition of SCM. SCM itself is still evolving
Over the years, I have devoted a few columns to the topic
of SCM vs. Logistics. In today’s issue, we report on
recent research on the relationship between SCM and Logistics.
The research supports a contention that there are different
perspectives as to the relationship.
New Research
The research was published in the most recent issue (2007
No. 1) of the Journal of Business Logistics. The article is
titled ÒPerspectives on Logistics vs. SCM: A Survey
of SCM ProfessionalsÓ, by Paul Larson, Richard Poist
and Arni Halldorsson, from 3 different universities in Canada,
the US and Iceland. It is based on a survey of SCM professionals
who are members of CSCMP, which yielded some 100 respondents
Before I got to read this research article, I held the confident
belief that Logistics is part of SCM. I based this belief
on the definition of Logistics used by CLM / CSCMP
Logistics is
• that part of the supply chain process
• that plans, implements and controls
• the efficient, effective flow and storage
• of goods, services and related info
• from the point of origin to the point of consumption
• in order to meet customers’ requirements
My confident belief was shaken after I read the research
article, which says that there are four perspectives. One
of them, called the Traditional perspective, caused the most
surprise to me.
The four perspectives are conveniently represented as Venn
diagrams for the SCM set and the Logistics set, and I can
describe them verbally as follows.
• Unionist: Logistics is within the scope of SCM, a
subset of SCM
• Intersectionist: Logistics and SCM are different and
separate, but have an intersection or overlap
• Traditionalist: SCM is within the scope of Logistics,
a subset of Logistics
• Re-labeling : Logistics and SCM are the same, SCM
is just a new label
A fifth possibility is that Logistics and SCM sets have no
intersection, nothing in common, but this possibility is indefensible.
The Traditionalist and Re-labeling perspectives are classified
as narrow perspectives, since SCM is limited to within the
scope of logistics.
The Traditionalist and Intersectionist perspectives are considered
shallow perspectives as they focus only on the strategic,
integrative aspects of logistics.
Highlights of Research Results
Since the research article is quite long, and our space is
limited, I will be very selective in what I will mention below.
• Popularity of the Perspective
Unionist 47%
Intersectionist 28
Traditionalist 19
Re-labeling 6
• Number of Functions Involved in SCM Implementation
Unionist 4.0
Intersectionist 3.1
Traditionalist 2.9
Re-labeling 2.5
• Number of Employees Re-titled in SCM Implementation
Unionist 97.5
Intersectionist 9.2
Traditional 6.1
Re-labeling 142.4
• Leading Sources of Knowledge about SCM
CSCMP
Seminars & conferences
Trade magazines
• SCM Implementation Experience vs. Expectation
More difficult
Broader in scope
More expensive
Slower
• SCM Implementation Facilitators
Top management support
Customer relationships
Organizational re-structuring
Integrated logistics management
• SCM Implementation Barriers
Functional silos
Incompatible technology /
systems
Lack of a common SCM perspective
Conflict among supply chain
members
Inadequate employee skills
DMAP Supply Chain
Conference
Meanwhile DMAP has announced its 2007 conference, to be held
at the EDSA Shangri-La on September 13–14, 2007. This
year’s theme is ÒCustomer Service Excellence:
A Continuing Challenge in Supply ChainÓ.
This year’s contest winner, Rodel Gamaya of Havi Food
Services, explained that his idea for a conference theme came
from his personal experience with their customers, who have
very high standards of customer service and expect this level
of service day in and day out.
Invitations have been issued for sponsorships and program
adver-tisements. Sponsors have started to reserve booths.
The rates are as follows.
• Principal Sponsor
(14 slots available)
Donation PhP 70,000
• Regular Sponsor
(30 slots available)
Donation PhP 35,000
• Cocktails Sponsor
(1 slot available)
Donation To be arranged with hotel
• Luncheon Sponsor
(2 slots available)
Donation PhP 150,000
• Break Sponsor
(3 slots available)
Donation PhP 75,000
• Advertiser
Fee P1,960 to P7,840, vat incl.
Address inquiries and comments to Ed Sanchez at tel. 671-8670,
fax 671-4793, cell 0918-914-1689, or email dmap@i-manila.com.
Those interested in DMAP training and other activities are
requested to send their e-mail addresses.
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Supply Chain Conferences
CSCMP
The 2007 CSCMP Annual Conference is scheduled for October
21-24 at the Pennsylvania Convention Center in Phila-delphia.
This is the largest supply chain event in the world. The Council
of Supply Chain Management Professionals is the largest supply
chain organization in the world, with around 9,000 members.
CSCMP recognizes the ongoing evolution of SCM. This year
it keeps up with the ever-changing world of SCM by including
11 new tracks among its 26 educational tracks. These new tracks
are:
• Designing for the Supply Chain
• Business Process Outsourcing
• Supply Chain 2020
• The Sales and Operations Planning Process
• Leadership and Executive Development
• Manufacturing: Driving Operational Standards to New
Heights
• Keeping SCOR in Your Supply Chain
• Labor Management for the Dynamic Supply Chain
• Supply Chain Management for Small- and Medium-Sized
Businesses
• Sustainability: Creating ÒGreenÓ Supply
Chains
• Trade Compliance
The other tracks are:
• Business Issues
• Collaboration Part I
• Collaboration Part II
• Current Research and Surveys
• Customer Service and Fulfillment
• Fundamentals
• Global Strategic Sourcing
• Global Transportation
• Procurement
• Retail
• Risk Management
• Strategic Planning for the Supply Chain
• Cases in Supply Chain Innovation
• Third Party Logistics
• Warehousing and Distribution
The total number of technical sessions is well over 100.
In addition there are 3 general sessions.
• Keynote speech by Carly Fiorina, former Hewlett-Packard
CEO
• Major presentation by MIT’s AgeLab, part of
MIT’s Center for Transportation and Logistics
• Closing session speech by Stanley Bing, Business pundit
and Fortune columnist
Other activities and facilities available are:
• CSCMP bookstore
• CSCMP Learning exchange: New community
• Student showcase – resumes, projects and papers
• Sit with an expert sessions
• Discussion forums
• Newcomers orientation
• Roundtable events
• Academics / educators
• CSCMP facility tours
• Multiple networking events
• Hot topics sessions
DMAP Supply Chain
Conference
Meanwhile DMAP has announced its 2007 conference, to be held
at the EDSA Shangri-La on September 13-14, 2007. This year’s
theme is ÒCustomer Service Excellence: A Continuing
Challenge in Supply ChainÓ.
Speakers are being lined up and will be announced as soon
as firmed up.
Invitations have been issued for sponsorships and program
advertise-ments. The rates are as follows:
Principal Sponsor
Donation P70,000
• One 9 sq. m. (3m x 3m) free standing exhibit booth
for your products/services during the two-day conference.
• Two (2) participants can attend the conference free-of-charge.
• Flyers and Brochures in the conference kits
• One-page advertisement in the souvenir program
• Unlimited hand-outs for distribution during the 2-day
conference.
• Acknowledgement as Principal Sponsor in the posters,
streamers, conference brochure and souvenir program
B. Regular Sponsor
Donation P35,000
• One 6 sq. m. (3m x 2m) free standing exhibit booth
for your products/ services during the two-day conference.
• One (1) participant can attend the conference free-of-charge.
• One-page advertisement in the souvenir program.
• Unlimited hand-outs for distribution during the 2-day
conference.
• Acknowledgement as Sponsor in the posters and streamer,
conference brochures and flyers.
C. Cocktails Sponsor ‘ Donation to be arranged with
hotel
• Entitlements same as Principal Sponsor, plus
• Option to conduct a 45-minute product/service presentation
during cocktails.
• Option to display materials indicating cocktails sponsorship
during cocktails.
D. Luncheon Sponsor (2 slots available) Donation P150,000
• Entitlements same as Principal Sponsor, plus
• Option to conduct a 45-minute product/service presentation
during sponsored lunch break.
• Option to display materials indicating luncheon sponsorship
during sponsored lunch break.
E. Break Sponsor (3 slots available) Donation P75,000
• Entitlements same as Sponsor, plus
• Option to conduct a product/service presentation during
the sponsored morning or afternoon break.
• Option to display materials indicating break sponsorship
during the sponsored morning or afternoon break.
F. Advertiser Fee P1,960 to P7,840, vat incl.
• Advertisement in the souvenir program, whole page
P7,840 / half page P3,920 / one fourth page P1,960, all amounts
VAT inclusive
Address inquiries and comments to Ed Sanchez at tel. 671-8670,
fax 671-4793, cell 0918-914-1689, or email dmap@i-manila.com.ph.
Those interested in DMAP training and other activities are
requested to send their e-mail addresses.
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Marketing vs Logistics
THE divide between logistics and marketing is a topic familiar
to everyone, particularly to those who are from either side.
From my own experience in Unilever, I had seen this already
even back in the 1970s. Of course, logistics then was not
yet known as logistics, but distribution.
It seems surprising that even now, this divide remains, with
all the advances in communications and calls and directions
for collaboration in the area of logistics management and
SCM.
In this issue we present a recent piece of research work on
the subject, which has been published in the Journal of Business
Logistics in late 2006. The research is a collaboration of
logisticians from the University of Alabama (Alexander Ellinger
and John Hansen) and the University of West Florida (Scott
Keller).
The authors start from previous research over the decades
by many authors, which have led to the following statements
and conclusions. I quote these statements from the article.
Each statement is backed up by research by many other authors.
• Logisticians and marketers must work together effectively
to leverage service operations for competitive advantage.
• In many organizations, overlapping functional responsibilities
and diverse departmental priorities continue to make service
failure a distinct possibility whenever customer order fulfillment
entails crossing functional boundaries.
• Within firms, logistics and marketing are often separate
and distinct from one another with functional managers tending
not to collaborate or coordinate activities.
• Although logisticians’ ongoing familiarity with
customer requirements may create significant value by helping
marketers to better understand and anticipate customers’
changing needs, they have yet to find evidence of logisticians
practicing these kinds of activities on a regular basis.
• Inter-functional collaboration is difficult to implement,
poorly understood and markedly rare.
• Most senior-level managers are ignorant about service
operations and uninterested in learning more about them.
• Successful intra-firm collaborations are strongly
associated with successful inter-firm collaboration.
With the above extensive review of past research on the subject,
the authors made use of in-depth interviews of 6 mid-level
logistics managers and 6 mid-level marketing managers regarding
critical positive and negative incidents. The technique is
called the Critical Incidents Technique.
The key results are summarized below:
• Logistics’ Perceptions of Marketing
o Marketers do not seek logisticians out enough
o Marketers do not pay attention to details and do not want
to be bothered with details after a sale has been made
o Marketers believe that logistics is easy
o Marketers are overly focused on the sale to the detriment
of profitability
o Marketers sometimes appear to think that their firms would
fall apart without them
• Marketing’s Perceptions of Logistics
o Logisticians are more focused on internal metrics than on
meeting customer requirements
o Logisticians have no idea what marketers go through on a
daily basis to serve customers
o Logisticians do not understand how marketing actions are
often dictated by the customer
o Logisticians are often unwilling to respond to marketers’
requests
o Logisticians can help them provide better service
• Facilitators of Collaborative Behavior
o Inclusive communication
o Strong working relationships
o Joint accountability for outcomes
o Senior management involvement
• Inhibitors of Collaborative Behavior
o Insufficient knowledge of the other function
o Lack of communication
o Poor working relationships
o Conflicting goals
o Lack of direction from senior management
The listed facilitators and inhibitors of collaborative behavior
make sense (the two lists are basically opposites of each
other). The Ògood newsÓ about the results are
that they are backed up by research.
On the perceptions, both ways, I must admit that in my past
experience at Unilever, the perceptions were more true between
Distribution and Sales, and a bit less true between Distribution
and Marketing. The conflict between Distribution and Sales,
and Marketing by affinity, was focused on the slow service
(order delivery cycle) as compared to competition, namely
Procter & Gamble and Colgate. Sales people were correct,
but they tended to exaggerate.
I feel some pride in helping resolve the conflict then, by
conducting an independent study, by Management Services Dept.
where I was assigned at the time, that actually measured the
order delivery cycle for Unilever, Procter & Gamble and
Colgate. I confirmed the superiority of Procter & Gamble,
but reported parity with Colgate.
I feel pride also that I was most probably the only one that
conducted measurements of the order delivery cycle and did
benchmarking, at that time (mid-1970s).
Address inquiries and comments to Ed Sanchez at tel. 671-8670,
fax 671-4793, cell 0918-914-1689, or email dmap@i-manila.com.ph.
Those interested in DMAP training and other activities are
requested to send their e-mail addresses.
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SCM Leadership
North Harbor Update
PortCalls came up with a news item on May 7 about the impending
bidding of the North Harbor to a single operator. I did not
see such news in other newspapers, the Inquirer, the Phil.
Star, BusinessWorld.
The most surprising element of the news item is the portion
about the PPA entering Òinto a concession with the
Philippine Chamber of Commerce and Industry (PCCI)Ó.
Qualifications for the single operator are said to be a minimum
paid-up capital of P500 million and at least five years experience
in cargo handling.
Even shipping line owners may bid, but with a limit to their
participation. The limit has been increased from an original
figure of 5% to 10%.
The PPA reportedly identified some potential bidders, namely,
the Magsaysay group, Aboitiz Transport Group, International
Container Services and Asian Terminals, Inc. Curiously Harbour
Centre has been left out.
In the past we had already mentioned the flip flop of PCCI
on the North Harbor issue. It seems that the flip flop this
time is connected with who is sitting on the PPA Board as
private sector representative. At least one exec at PCCI is
said to be furious about the stated position of the PCCI.
Shipping Immersion Course 2007
All slots have been filled up for this year’s Shipping
Immersion Course, scheduled for May 17 to 20. It will be on
a Negros Navigation vessel, and will go to Coron, Palawan.
Speakers will be key industry personalities from MARINA (Ric
Romero), PPA (Hector Miole), PSB (Clem Paylangco), Henry Basilio
(UA&P), Dennis Llovido (Nestle and DMAP), Cora Curay (XVC
and DMAP) and Nenaco. The trip is a good avenue for networking
and benchmarking opportunities.
Leadership, a Hot Topic
As a member of CSCMP (Council of Supply Chain Management Professionals),
one of the publications I get is CSCMP Supply Chain Comment,
which is published 6 times a year. It contains concise interesting
articles on SCM, dealing with the latest in both management
and technical issues.
I recently noticed that in three successive issues, there
are articles about Leadership. These three articles are:
• Sept./Oct. 2006 — Whether or Not You Succeed
Depends on How You Lead, by Burt Blanchard
• Nov./Dec. 2006 — 21st Century Leadership : How
We Can Become Better
Supply Chain Management Leaders, by John Caltagirone
• Jan./Feb. 2007 — Ed Huller on the Power of Positive
Leadership, by Madeleine Miller-Holodnicki
It is no coincidence that three articles in consecutive issues
are about Leadership. There is a need to pay good attention
to the need for good leadership in the SCM function.
Burt Blanchard is Manager of Education and Research for CSCMP.
In the first article he says that there are many leadership
styles. One style is leading with Emotional Intelligence (EI).
But in his article, Blanchard focuses and discusses in great
length another style, which is the role of the servant leader.
The term Òservant leaderÓ was coined in 1970
by former AT&T executive Robert Greenleaf. It is based
on the Golden Rule, ÒDo unto others as you would have
them do unto youÓ.
ÒServant leaders serve customers and companies in
ways that could be perceived as unorthodox or paradoxical
... The servant leader takes the typical top-down hierarchical
pyramid and turns it upside-downÓ. Sounds like a very
good style for public officials
The second article is by John Caltagirone, a founding member
of the Global Virtual Roundtable. He also served on CSCMP’s
Education Strategies Committee.
Caltagirone says that leaders must have an abundance of strategic
knowledge, and must be able to get the best possible results
with such knowledge. Strategic knowledge includes understanding
the industry, the company, the business units, and Òhaving
a grasp of evolving trends, emerging technologies, business
principles, organizational roles and responsibilities, organizational
culture, corporate and business unit visions, missions and
clear objectivesÓ. It also includes knowing how to
lead, manage and motivate people.
Savings can be huge, and can be achieved without new technology,
labor-saving equipment, or a reorganization. ÒThe best
SCM leaders in the world have the ability to work with others
collaboratively and effectively lead changeÓ.
In the third article, Ed Huller, the new Chairman of the
CSCMP Board, defines leadership as Ò.... having a vision
of where you want to go, creating a path to get there, setting
high expectations for people, and expecting them to exceed
those expectationsÓ.
To Huller, world-class leadership and on-the-job excellence
is all about attitude. It doesn’t matter what you do,
just do it wellÓ.
The top-performing organizations are those in which all of
its people are on Òa daily relentless pursuit of improvementÓ,
and it is those who are in leadership positions who must inspire
and encourage people in this pursuit.
Leadership Seminars
Blanchard himself said that Òleadership training is
one of the hottest seminar topics aroundÓ. Lately we
have been getting a number of fax offerings on leadership
training by different groups. DMAP itself is cooking up something
on this.
Along this line, in its last general membership meeting,
DMAP started to include a mini-seminar series on Òsoft
skillsÓ. The first one was on setting priorities. It
was given by DMAP Director and Academe Relations Committee-in-Charge
Ninoy Rollan, also TNT Express Country Sales Director.
Address inquiries and comments to Ed Sanchez at tel. 671-8670,
fax 671-4793, cell 0918-914-1689, or email dmap@i-manila.com.ph.
Those interested in DMAP training and other activities are
requested to send their e-mail addresses
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Key
Logistics Decisions, Cont.
IN the last issue we discussed the first two of four major
decisions that companies grapple with, which impact the most
on their logistics processes.
The discussion on four key decisions was part of my talk
on Logistics 101 at a MARINA – co-sponsored seminar
on logistics last March 20, called the ASEAN-JAPAN Logistics
Pilot Seminar in the Philippines.
The four key decisions are:
1. Location of Factories. Should I have a factory in every
country in Asia or Southeast Asia, or should I consolidate
my factory in one country? And where should it be?
2. Customer Focus. Should I serve numerous small accounts,
or should I deal with one national distributor, or something
in between — several regional distributors?
3. Distribution Network Configuration. Should I have many
depots or just one central warehouse? How many and where?
4. Own or Third Party Logistics. Shall I do my own logistics,
or should I hire an expert TPL provider?
We now discuss Decisions #3 and #4.
Distribution Network Configuration
This issue deals with the question, how many depots (sometimes
referred to as satellite warehouses or field warehouses) should
there be?
In the 1970s to 1980s the trend was to increase the number
of depots. Unilever increased from 5 in the mid-1970s to 14
in the upper 1980s, which was during my time. The dominant
thought was stocks must always be available for the markets.
Sales Dept. had a loud voice. Sales management always said
that our main competitor Procter & Gamble had a warehouse
in area x. Colgate likewise. It was easy to justify the establishment
of an additional depot by claiming a 5% increase in sales
in the area.
The upper 1980s to mid-1990s was a period of mixed directions.
Many companies began to realize the high cost of warehousing
plus the cost of inventory. Unilever was one of the companies
to recognize this. But certain companies continued with the
uptrend, notably San Miguel Corp., Nestle, Universal Robina
Corp. Nestle reached a maximum of maybe 30+ depots. SMC reached
a maximum of around 140 warehouses. The dominant belief was
that there should be beer on every island.
The upper 1990s up to now is a period of decreasing depot
numbers. There are companies that have only one warehouse,
notably Colgate, P&G, Unilever (outsourced).
But the debate is not over, even in the US. There are two
schools of thought
1. Warehouse networks are too expensive. They never really
work. Stocks committed to a field location become unavailable
for other areas, except at great expense.
2. With few depots, customer delivery costs are high, while
warehousing and inventory costs are low. As the number of
depots increases, warehousing and inventory costs increase,
while customer delivery cost decreases. There is an optimum
number of depots where the total cost is at a minimum.
Warehouse networks allow faster service to customers because
the stocks are nearer. This makes possible next day or same
day delivery.
In a way, the issue is analogous to the one factory vs. many
factories decision
Own vs. Third Party Logistics
The question is - do you do your own logistics or do you hire
a TPL? Do your own logistics could mean that you have your
own transport truck fleet, and run your own warehouse.
In the 1970s to 1980s, no company could entrust one’s
own operations to another party, because of a fear of loss
of confidentiality, and a lack of faith in the third party’s
distribution capability.
In the 1970s, there already existed entities offering services
covering segments of the logistics functions, such as shipping,
trucking, warehousing, but none offered integrated services
covering all of these services, esp. on a long term basis.
Services in those days were commonly transactional. Shipping
was per shipment. Trucking could be for a one year period,
or per shipment if there is no contract. Likewise warehousing
could be for a year, or seasonal.
In the Philippines, one of the pioneers in TPL was Fast Cargo
Transport Corporation, a subsidiary of former shipping giant
William Lines. In the late 1970s, I engaged Unilever to sign
a contract with FCTC which was in effect a TPL arrangement,
even though the term TPL had not yet been coined then.
In the 1990s, confidence in third party logistics providers
increased, and the trend became worldwide and now appears
irreversible. As has happened probably everywhere, TPL providers
evolved from either transport based companies or from warehousing
based companies. Here in the Philippines I can think of examples
like William Lines, Aboitiz Shipping and Delgado Brothers
as parent companies.
Shipping Immersion Course 2007
There are still slots open for this year’s Shipping
Immersion Course, scheduled for May 17 to 20. It will be on
a Negros Navigation vessel, and will go to Coron, Palawan.
Join this truly informative course and experience a unique
learning experience on board a ship. Get the latest information
about the shipping industry, its vital importance, and understand
its impact on distribution and logistics. Speakers will be
key industry personalities from MARINA (Ric Romero), PPA (Hector
Miole), PSB (Atty. Pete Mendoza), Nenaco and DMAP. The course
will also give participants networking and benchmarking opportunities.
Fees are P11,950 for DMAP members and P14,935 for non-DMAP.
Address inquiries and comments to Ed Sanchez at tel. 671-8670,
fax 671-4793, cell 0918-914-1689, or email dmap@i-manila.com.ph.
Those interested in DMAP training and other activities are
requested to send their e-mail addresses.
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Key Logistics Decisions
AT a MARINA-co-sponsored seminar on logistics last March
20, called the ASEAN-JAPAN Logistics Pilot Seminar in the
Philippines, I was tasked to give a one-hour introduction
to logistics. The audience, numbering around 100, was a mixed
group of government staff and private sector personnel.
I modified the title of my talk a little, from Overview of
Logistics, to Logistics 101.
Towards the end portion of my talk, I discussed four key
decisions that companies currently grapple with, that have
the largest impact on the logistics processes of companies.
Below we enumerate them and discuss two of them in this issue.
The four key decisions are:
1. Location of Factories. This deci-sion is for transnational
companies. The question to be answered is – should I
have a factory in every country in Asia or Southeast Asia,
or should I consolidate my factory in one country? And where
should it be?
2. Customer Focus. The question to answer is – Should
I serve numerous small accounts, or should I deal with one
national distributor, or something in between – several
regional distributors?
3. Distribution Network Configu-ration. The question to answer
is – Should I have many depots or just one central warehouse?
How many and where?
4. Own or Third Party Logistics. The company decision is
– Shall I do my own logistics, or should I hire an expert
TPL provider?
Location of Factories
The first decision, on location of factories over several
countries, is actually basically the same problem as for a
multi-plant decision in one country. For example, multiple
breweries in the Philippines for San Miguel beer. The problem
structure is the same for a multi-country situation, except
that the supply chains are longer, there are border transactions
and costs, and there are culture / language considerations.
In more recent times, transnational companies have been consolidating
manufacturing in one or a few factories in a chosen country.
Colgate Palmolive consolidated manufacturing outside the Philippines.
Nothing is produced anymore on J. P. Rizal, Makati. Unilever
has also closed down most of its factories on U. N. Avenue.
Procter & Gamble chose to maintain manufacturing in the
Philippines. Avon also chose to stay. Nestle has stayed in
the Philippines and is now expanding its plants here. Toyota
continues to manufacture transmissions here and will invest
to more than double its capacity. Recently Uniden decided
to close down its cordless phones factory here and chose to
consolidate manufacturing in China.
What makes a company decide to consolidate manufacturing
in one country versus another? The considerations are what
one might expect, total cost for the entire region of countries
(transport, manufacturing, inventory cost, etc.) and service
(supply lead times) for all the markets in the region
The impact on logistics is tremendous. Supply chains get
much longer for markets in the non-chosen countries. A single
product design, esp. packaging, must be developed for the
entire region
The direction has been towards fewer factories. This reduces
total manufacturing cost, due to more efficient production
in the chosen factory, plus economies of scale. However, total
transport cost goes up due to overall longer supply chains.
Customer Focus
In key decision #2, which is about customer focus, the choices
are: one national distributor vs. several regional distributors
vs. many small accounts. The trend has been from many accounts
to few, to cover the entire market.
Considerations in this decision are financial and sales capability
of distributors, logistics capability of distributors to handle
many accounts and big accounts, complexity in systems and
communication, and tolerable distance from smaller accounts.
As an example, up to the mid-1980s, Unilever maintained 5,000
accounts on credit, not counting many thousand retailers served
by distribution salesmen on cash basis. Imagine how complicated
that was at a time of primitive computerization. Since then,
Unilever has divided the country into territories and appointed
regional distributors. It awarded the distributorships to
retiring salesmen. The scheme had many problems at first.
J&J, Colgate and P&G have gone into similar set-ups.
In the case of three divisions of Unilab, they opted to choose
a single distributor in Diethelm at the turn of the millennium.
The arrangement went on for several years, and is now at its
end. Zuellig Pharma serves as a single national distributor
for several principals. There are other examples of national
and regional distributorships.
We continue with key decision #3 and #4 in the next issue.
Shipping Immersion Course 2007
This year’s Shipping Immersion Course is scheduled for
May 17 to 20. It will be on a Negros Navigation vessel, and
will go to Coron.
Join this truly informative course and experience a unique
learning experience on board a ship. Get the latest information
about the shipping industry, its vital importance, and understand
its impact on distribution and logistics. Speakers will be
key industry personalities from MARINA (Ric Romero), PPA (Hector
Miole), PSB (Atty. Pete Mendoza), Nenaco and DMAP. The course
will give participants networking and benchmarking opportunities.
Fees are P11,950 for DMAP members and P14,935 for non-DMAP.
Address inquiries and comments to Ed Sanchez at tel. 671-8670,
fax 671-4793, cell 0918-914-1689, or email dmap@i-manila.com.ph.
Those interested in DMAP training and other activities are
requested to send their e-mail addresses.
Back to top
More on Regulatory Capture
Another Brave Voice
We now have the words of former NEDA chief Cielito Habito,
to add to Secretary Neri’s statements on the form of
corruption called regulatory capture
In his No Free Lunch column in the Inquirer on March 26,
2007, Mr. Habito echoed the pronouncements of Sec. Neri on
“the costliest and most pernicious form of corruption
in the economy”.
Mr. Habito says that in the case of more common forms of
corruption, such as bribery and overpricing, “the resulting
loss to the general welfare is well understood. But all these
are nothing compared to what we lose when sound economic policies
are thwarted by regulators who are captured by the very interests
they are supposed to regulate.”
Mr. Habito continues, “One peso spent by a particular
business interest to ‘capture’ a regulator can
yield him perhaps a hundred pesos in unearned profits, but
bring about a thousand pesos worth of loss to the public interest.
These come in the form of loss of investments and jobs, workers’
income and economic productivity, and a general reduction
in social and consumer welfare.”
Regarding the PPA, Mr. Habito says “PPA’s posture
that is seemingly protective of the interests of the dominant
player in port handling services unduly raises the cost of
cargo handling and turnaround time. This ultimately stifles
growth of our productive sectors, including and especially
agriculture, due to higher transport costs. The victims ultimately
include the farmers who end up receiving a tiny portion of
the final price of the product, squeezed by the high costs
of bringing their goods to the final consumer.”
Hurray for Mr. Habito !
Two personalities speaking out against regulatory capture
is a very good development. This is a far cry from as recently
as a year ago, when everybody just continued to take the situation
sitting down. Will this new development lead to change at
all? This remains to be seen. It depends on how strong Sec.
Neri is, and if PGMA will tell him to shut up.
This Is Not All
But wait, that is not all, for the problems in sea transport.
In previous columns I have written before about DMAP’s
complaints regarding two legislative shortfalls.
• Lack of legislation on competition / antitrust
• The need to repeal and replace PD 857
The first one allows cartels and monopolists to control markets
in sea transport and cargo handling. The second one allows
the conflict of interest in PPA, whereby it has a share in
the rates that it sets. Thus the second one not only allows
the PPA to add to the cost of sea transport with its unnecessary
share in cargo handling, but gives it the power to increase
this charge through its rate-setting function.
Actually it has not been just DMAP harping about the lack
of appropriate legislation. Many organizations have spoken
before, for example FPI, Philexport, CSPM, CCC, PCCI.
“Legislatory Capture”
Maybe the readers will allow me to coin the term “Legislatory
Capture”, which is the failure of lawmakers to enact
appropriate legislation because they have been captured by
business / commercial interests.
In the last issue I hinted at capture at even higher levels
of government, citing Erap’s endorsement of EO59 as
an example. If we also look back to 2002, I mentioned in this
column two TV commercials which I called:
• “Uuy labing-labing”. Two children tease
their parents about their affectionate moves after a discussion
on cheaper rice now available to the people. Then President
Gloria appears and makes the announcement about the cheaper
rice. A clear campaign for 2004? Afterwards the screen shows
“in cooperation with The National Food Authority and
ICTSI”, the latter complete with logo.
• “Uuy hangin-hangin”. Here President GMA
announces cheaper electricity now available to the people,
because of what she claims to be her order to slash the purchased
power adjustment from our electric bills. This ad has also
been released “in cooperation with ICTSI”.
Why would a cargo handling firm fund such advertisements?
Seminars for Re-scheduling, Shipping Immersion 2007
We apologize for the postponement of the Warehousing Seminar
I and the subsequent re-scheduling of other seminars. We will
be announcing new schedules as soon as available.
For now the Shipping Immersion Course is already fixed in
schedule, which will be on May 17 to 20, taking a Negros Navigation
vessel, and going to Coron.
Join this truly informative course and experience a unique
learning experience on board a ship. Get the latest information
about the shipping industry, its vital importance, and understand
its impact on distribution and logistics. Speakers will be
key industry personalities from MARINA, PPA, PSB, Nenaco and
DMAP. The course will give participants networking and benchmarking
opportunities.
Fees are P11,950 for DMAP members and P14,935 for non-DMAP.
Address inquiries and comments to Ed Sanchez at tel.
671-8670, fax 671-4793, cell 0918-914-1689, or email dmap@i-manila.com.ph.
Those interested in DMAP training and other activities are
requested to send their e-mail addresses.
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